Juggling compliance and immediacy in the digital age

Of all the changes brought about by the smartphone, the rise of a culture of immediacy has arguably run the deepest.

People increasingly expect to be able to do anything - connect with others, make travel arrangements, buy goods, pay bills and more - at any time, wherever they are. And they expect the process to be quick, painless and frictionless.

These heightened expectations and general impatience extends to signup and onboarding processes, including the Know Your Customer (KYC) requirements and other compliance checks conducted by financial services providers.

Balancing consumer demand for a frictionless experience against the need to prevent fraud and protect customers' sensitive information is an ongoing challenge.

Shifting perception: compliance as a hero

Compliance is often the convenient scapegoat for a poor user experience.

Yes, it is true, regulator-mandated friction does exist. PSD2's strong authentication requirement for all electronic payments over €10 is a prime example.

However, this doesn't make compliance a villain. On the contrary, it's often the hero. We're more than happy to get our money back if a transaction goes awry. And this is only possible because financial companies carry out compliance checks in the first place.

So, consumer education has a pivotal role to play.

It's all too easy to feel frustrated when you don't understand the reasons for an often lengthy and - let's face it - boring procedure. If, on the other hand, we understand the why, compliance may finally start getting the credit it deserves.

That said, it would be short-sighted to blame customer objections entirely on lack of understanding. It's also about the way the process is presented and executed.

Compliance: the new normal

Financial laws mandate compliance checks. The same laws do not mandate forcing customers to click through a series of eight clumsily designed forms. Nor do those laws force customers to send piles of paperwork by snail mail.

KYC checks have improved by leaps and bounds when it comes to ease and efficiency. What was still science fiction a decade ago - back when smartphones were "revolutionary and magical" - seems today to be "the new normal." This has helped speed up the compliance process immensely.

Fintech companies have led the way, allowing consumers to upload copies of their identification documents securely and utilising tools such as facial recognition technology or video interviews for verification. In the process, fintechs have successfully driven thousands of signups despite having stringent compliance requirements. And they've shown that compliance and speed aren't mutually exclusive.

Banks and other traditional financial services providers have slowly but surely caught on too. Online applications have become fairly standard, even when it comes to products such as bank accounts, especially with the rise of electronic signatures.

However, The Battle to On-board, a 2016 study on British attitudes to KYC, found that 40% of respondents who applied for a financial product abandoned the signup process because it took too long. More to the point, 55% expressed their displeasure at having to send hard copies of KYC documents, saying they'd be more likely to finish their application - and apply for other products - if the process were 100% online.

Clearly, the ability to complete onboarding as quickly as possible without forcing customers offline will continue to drive competitive advantage.

KYC fast track: frequent flyer treatment

It's not easy to strike a balance between compliance and immediacy, but that doesn't mean it isn't possible.

Admittedly, we're already seeing some innovative solutions. MasterCard's pilot project in Nigeria, for instance - a national ID card with electronic payment functionality - effectively has built-in continuous authentication. And, because it's a physical card, it doesn't rely on access to the latest smartphone technology (or any other electronic device, for that matter).

An even better solution could be to tackle compliance using a tiered approach.

This is hardly an unfamiliar concept in financial services. A risk based approached is often used, whether choosing to apply simplified or enhanced due diligence, to determining which kinds of investments are best suited to a particular customer. This approach could be extended to onboarding by allowing customers to choose from one of two levels.

On the one hand, customers for whom immediacy is the primary concern could opt for a KYC fast track, much like a VIP airport lounge. By consenting to share some of their data with a network of trusted partners, they could get KYC-ed just once. This would greatly speed up the onboarding process when they apply for a new product or join a new service.

Those more serious about privacy could opt for tougher onboarding. Provided, of course, that they're happy for the process to be longer, if that's what it takes.

Creative solutions & consumer education

A lot will also depend on future regulation. Laws are constantly evolving and it will take time for them to more closely reflect current market trends. Meanwhile, it is up to operators to lead the way. And not just by finding creative ways to streamline the compliance process and make it more efficient. But also by helping to educate customers on compliance's crucial role in keeping their money safe.